Planning to buy
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Planning to Buy. Objectives:. Describe the merchandise planning function Outline internal and external sources of planning information Explain factors to be considered in preparing financial and merchandise assortment buying plans Describe ongoing inventory management planning

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Planning to Buy

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Planning to Buy


Objectives:

  • Describe the merchandise planning function

  • Outline internal and external sources of planning information

  • Explain factors to be considered in preparing financial and merchandise assortment buying plans

  • Describe ongoing inventory management planning

  • Explain the variables in selecting merchandise sources


The Merchandising Cycle

  • Planning

    • Forecasting

  • Buying

    • Obtain merchandise through vendors

  • Selling

    • Direct and Indirect selling


The Planning Function

  • Retail Buyers

  • Select and purchase goods for their companies

  • Responsible for one or more classifications or departments

  • Develop the merchandise plan


Gathering Information

  • Internal information

    • Past sales records (most important)

    • Salespeople and managers

    • Want slips

    • Consumer behavior and opinions

    • Store fashion bureau

  • External information

    • Vendors and other buyers

    • Trade information

Do your homework before you buy.


Preparing the Buying Plan

  • Six-month plan

    • Utilizes last year’s sales to project new season

    • Plan shows each month’s merchandise needs to meet consumer demand

  • Merchandise plan

    • Types and quantities

    • Price points

    • Set amount of money


Buying Terminology

  • Stock turnover (TO)

    • Number of times inventory is sold and replaced in a given period; how fast inventory goes in and out of the store

  • Open-to-buy (OTB)

    • The dollar amount of merchandise the buyer may order during the month


Assortment Planning

  • Buyers goal: Achieve a balanced stock assortment

  • Maintain basic stock

    • Sell regardless of conditions

  • Maintain model stock

    • Risky fashion items that rise and fall with consumer demand

  • Stock-keeping unit (SKU)

    • Smallest unit for which records are kept

Balanced Stock


Additional Planning Considerations

  • Maintain stock to meet consumer demand (depth and breadth)

  • If inventory low, build with current styles and colors

  • Supplement with complementary products

  • Specification buying

  • Consignment buying

  • Clearance or off-price


Inventory Management

  • Computerized inventory-management systems

  • Electronic point-of-sale (EPOS) equipment

  • Vendor-managed inventory (VMI)

    • Quick response


Selecting Merchandise Sources

  • Manufacturers

    • Goods are latest styles

    • Prices are lower

    • Can be made to order

    • Merchandise support available

    • Higher quantities

  • Wholesalers

    • Resellers or distributors

    • Greater breadth and depth options from several manufacturers

    • Smaller quantities may be ordered


Other Sources

  • Web and catalogs

    • No sales pressure

    • Only photos, no fabrics

  • Importers

    • Favored by mass merchandisers

    • U.S. agents take orders

    • May be shipped direct to store


“Shopping” for a Vendor

  • General Criteria

    • Payment and credit terms

    • Minimum purchase requirements

    • Reorders- usually not available on higher-priced goods

    • Return policies

    • Retail pricing rules

    • Distribution and confinement practices


Other Considerations

  • Services

    • Training of salespeople

    • Promotional assistance

    • Fashion shows

    • Markdown insurance

    • Vendor pre-ticketing

    • Floor-ready merchandise (FRM)


Look at Past Performance

  • Working practices

  • Word of mouth reputation

  • Fairness

  • Accuracy of orders

  • Deliveries

  • Quality

  • Turnaround time (from order to delivery)


Know What You Are Getting

  • Know terms

    • Discounts allowed

    • Payment period

    • Transportation arrangements

    • Date of delivery

    • Point of transfer of title to the merchandise

    • Allocation of transportationcosts

Don’t be pressured into anything!


Choosing Number of Suppliers

  • Single Supplier

    • Larger orders can mean quantity discounts

    • “Favored customer” status

    • Greater cooperation in developing exclusive products

  • Several Suppliers

    • Less dependence on one supplier if there is a problem

    • Access to market information

    • Better service (competition)

    • Wider selection


Advantages

Lower cost, higher markups

Unique products

Consumers cannot shop and compare

Add status or prestige

More variety of goods

Jobs to developing countries

Disadvantages

Buying trips longer and costlier

Longer lead times

No reorders

Communication problems

Sizing, fit, and quality

Legal complications

Financial risks

Delays in shipping

Takes jobs from U.S.

Offshore Sourcing


Do You Know . . .

  • Retailers have design control over private labels.

  • If a company participates in private labeling, there is no markdown money or warranties from the manufacturer if there are problems.


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